CMAI Q1 Apparel Index: Growth touches 6.2 points as big brands lead

CMAI’s Apparel Index for April-June (2015-16) reveals that the industry continued its upward growth curve with overall index value recording 6.2 points. Much like the previous quarters, it’s the bigger brands which have done far better with higher sales turnover and lower inventory holding.

Small and mid-level brands are lagging behind on all accounts -- be it sales turnover, sell through, inventory holding or investment. But there is a sense of optimism most predicting good or excellent future growth.

Big brands sail through Q1

At 6.2 points growth overall the figure is approximately 54 percent higher than the index for Small Brands with turnovers of Rs 10 to 25 crores. Small Brands clocked in 4.03 points growth while Mid Brands with turnover of Rs 25-100 crores, saw 6.75 points growth. In fact, Mid Brands performed much better than Small Brands. But it’s the Large Brands with 7.93 points and Giant Brands with a high index value of 10.67 points which were the real success stories.

Q1 Index clear indicates that Large and Giant Brands are doing much better than Small and Mid-level ones. Index pattern this quarter, much like last quarter, reflects, as the size of brands goes up, performance improves. Interestingly, Sales Turnover also increases in the same pattern and inverse in the case of Inventory Holding. It clearly reflects the impact Sales Turnover and Inventory has on performance.

Commenting on growth in Sales Turnover, Vineet Gautam, Country Head, Bestseller India says, “We have opened ONLY stores in cities like Hyderabad and Lucknow and continue to be aggressive in our growth strategy. The jump in brands sales turnover is a testimony of all our efforts being in the right direction.” Similarly, Kunal Mehta, VP-Business Development and Marketing, Being Human explains, “We increased the number of stores. Our SIS numbers have gone up and we started vertical distribution and are now available at around 200 MBO’s in India. We have also increased our e-commerce partners.” Adds Sandeep Jain, Executive Director, Monte Carlo, “Our Sales Turnover grew because of overall better sale at the retail level.”

Among the four groups of brands based on turnovers, Giant Brands have been growing consistently each quarter. This time too, Giant Brands grew the most in Sales Turnover while their Inventory Holding increased the lowest, whereas Small Brands Sales Turnover grew the lowest and had the highest increase in Investment Holding. Growing Sales Turnover perhaps explains why Giant Brands have a strong Index Value at 10.67 whereas Small Brands scored a low 4.03.

Inventory holding still a burden

A close look at the four parameters reveals Sales Turnover continued to grow moderately at 4.84 points. However, increased Inventory Holding continued to bog down the apparel industry’s performance. In fact, this factor alone can offset the positive contributions of all other parameters. Sell Through and Fresh Investments improved, though moderately.

Inventory Holding increased across the board amongst all brands i.e. 74 percent of them. However, 12 percent said their Inventory Holding remained the same. A good 14 percent witnessed a decrease in Inventory Holding. As Rajiv Nair, CEO, Celio explains, “We operate on a lean merchandise planning model. The goal is to reduce slack inventory i.e. under productive inventory under productive locations. Inventory is held centrally in a mother warehouse and is available to stores which contribute and deserve the stocks, rather than overfill good and bad locations equally. Hence, we have been able to operate stores with 18 percent more sales like for like (LFL) with no increase in stocks. We also work on an end of season inventory target which we chase aggressively.”

As for Fresh Investments, 81 percent respondents have increased their investments. As Suraj Bhatt, Brand Head, Allen Solly points out, “We have made fresh investments this quarter to fund higher sales and retail expansion.”

A comparison of Apparel Indices of Q1 April-June 2015 and 2014 reveals the Index Value was higher at 9.15 last year compared to 6.2 for 2015. Overall, the apparel industry failed to maintain growth against the same quarter last year on all aspects. Low consumer spending further affected the Sales Turnover. But nearly 48 percent brands feel that the outlook for next quarter from July to September is good.